Canadian junior mining companies can breathe a sigh of relief as Budget 2016 extends a tax break for exploration companies that finance their exploration using so-called “flow-through” shares.

The federal government has extended the 15 per cent mineral exploration tax credit, which was slated to expire on March 31, until the end of March 2017.

“Given this is a challenging time for junior mining companies, the government proposes to support their mineral exploration efforts by extending the credit for an additional year,” the budget documents state.

Flow-through shares allow individual taxpayers to book their share of a company’s exploration expenses as credits against their personal incomes. Junior exploration companies tend to have little or no revenue, so they’re usually content to “renounce” their claim to exploration expenses.

The mineral exploration tax credit is available to finance “grassroots” mineral exploration in Canada.

Extending the mineral exploration tax credit will cost the federal government about $20 million in lost revenue over the next two fiscal years. That’s because the credit uses a so-called “look-back” rule which allows funds raised in one calendar year with the benefit of the credit to be spent on eligible exploration projects within the following calendar year.

Financial Post
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